Before You Lose Your Job, Make A Contingency Plan

By Phil VillarrealFebruary 3, 2012

No matter how firmly entrenched you are in the corporate womb or how indispensable you appear to be, you could lose your job without notice. The only thing worse than losing your job by surprise is losing it by surprise with no plan to adjust your budget until you find work again.

Married With Debt recommends planning in advance for the grim surprise of a job loss. Here are some takeaways:

* Pre-slash your budget. Look for some fat you’ll be able to trim if need be. Examples include slimming down your entertainment expenditures, scaling down services and choosing ways to come up with extra money.

* Build up an emergency fund. Tailor your savings goal to your trimmed budget, and keep a running count of how many months the fund will allow you to survive before having to resort to credit or borrowing.

* Come up with multiple plans. If you have several income sources, come up with plans of adjustments to make if one of them goes away, as well as a worst-case scenario if you lose all current income streams.

*sighs* This post almost made me cry. :/ Most of these things are obvious, but sometimes, you just can’t help it — like spending your emergency money on repairing your car, and then… Well. Things happen…

OK, maybe I’m feeling especially grumpy or snarky today, but some of the things listed as money savers in case of job loss seem a little high end, like the wine of the month club reference. I’m sure it’s just used as an example, but still.

That being said – if I lose my job, I won’t max out my credit cards on anything. That’s just one way to make matters worse in the long run. Unless you file for bankruptcy, you’ll still have to pay back the money someday, with tons of interest.

To be fair, a number of the stories I read about in this area (DC Metro) are about the folks who are about to lose their house because they want to keep their kids in that $25K/year private school and Mercedes in the driveway, plus they won’t take a job for less than $80K

Ah, that explains it. That’s so far above my pay scale I had no idea. My take home pay would barely pay for their private school, let alone anything else. But I have my Ford, a place to lay my head, and food to eat. Plus 3 adorable pets…and some outside critters. Life is good.

Also, some of those tips should be carefully considered before taking action. I question if the time and impact of donating plasma is worth the compensation. Is that going to be the most effective use of your time, and how much will it bring in a month? I guess if you’re really donating other fluids you can make a day of it to maximize earnings.

Selling your stuff isn’t bad advice if it’s something you’re not using or know you can live without. That said, I had an acquaintance who repeatedly sold off video game systems for well under what he paid for them. When his finances improved, he’d be out buying a new system and games. In the long run, it did nothing but cost him more money.

I’d be hesitant to mess too much with car insurance, child care, and some other items unless it was really a dire, prolonged situation. If you reduce to liability coverage and cause an accident, you’re going to have to go out of pocket for any repairs your car needs. If you pull your kid from child care, it may not be possible to just put your kid back in if/when times improve. Continued child care is a part of our emergency budget.

Yeah this is a problem, people buy a gadget, trade it in for pennies on the dollar then they buy it again. Then they wonder why they are in debt. If you really like the item you are better off just using it until it either breaks on you to the point where you can’t use it anymore or if it becomes so outdated that its not practical to use it anymore. If you do this several times it could easily end up costing you several hundred dollars or more. If you are so much in debt that you have to start hocking your few personal possessions to a pawn shop then you have much bigger problems than worrying about how to re-acquire that non essential item.

This is something you should be thinking about all the time. Gone are the days where you showed up for 30 years you got a watch and pension. Gone are the days where did your 8 and came home without a worry. Now you must plan for NOT getting 30 years somewhere and assume you next day could be the last on the job.

I’d say live below your means as often as possible. Learn about investing long before retirement or a layoff. Also gone are the days where you could hangout at the bar at night instead continuing your education on a yearly basis. That means a classroom and books instead of beer & burgers. This means computer lab instead of a big screen.

NEVER EVER listen to anyone who says, promises or implies you will get a 30 career with one company. They are liars or ignorant. Never let anyone use a ‘career’ to bait you. You must assume you WILL get laid off one day and must prepare ahead of time. The average employee/worker will be like a contractor having to sell their resume and buy their own benefits. Like a contractor you have to get licenses, certifications and/or degrees. The long term company man is a thing of the past.

I’m sad I never got to participate in those days. I think employment in the US will become some kind of transitory experience, where a lot of people are “temps” in the future. I’m just going to pay off as much as I can, and save as much as I can and hope for the best.

I hear you. There was also something called “interest” back in the day. You could save your money, and put it in a bank, and get paid money for doing so. Back in the 80’s you could get 12% on a 5 year CD. Now it’s virtually nothing.

I too missed out on all the good times, and am paying off debt as quickly as possible and will hunker down for the next 21 years of my working life and wish for the best.

Job loss should never be a surprise. The surprise should be when and not the fact that you got laid off. You should be paying attention to what’s going on in your company and industry.

I know people who got information over year before they got layed off that their location would probably close if certain things played out. So instead of planning and saving they went out and spent like there was no tommorow. That was 4 years ago. They are now bankrupt and bitter still in disbelief that their company actually followed through on their strategy/plans to close. Although profitable their location was losing business/volume. Even the employees who did the work didn’t have to see a balance sheet.

Can’t go to work like a robo employee anymore. You must be vigilant and prepare for a layoff or career or job else where. Forgot to add earlier but everyone must learn the difference between a job and a career AND know why you at your current employer-are you there for a job or career.

I’m glad someone else feels this way. I thought that too, but I thought I was just grumpy today. Many of the things on that list just don’t apply to me (or my friends/family) for that matter. I can safely say if I lose my job, there will be no stocks, precious metals, or excess cars to sell.

Same here. I’m losing about 40% of my income starting the week after. I looked over my expenses and what I have — my income will not be able to cover my mortgage, phone bill, and my car insurance. Granted, my brother will probably be able to help out with some bills, but it’s still hard. I don’t have anything else on that list as it is, so i can’t trim anything back. The best I could do is make a meal plan at the beginning of each week and stick to it hardcore, so I don’t end up spending beyond the budget. (And I don’t spend that much as it is…)

I downloaded an expense tracker app, hopefully that will help me keep track of my expenses just a bit better… I sure wish I have some big ticket items like — private school tuition (anywhere between 20k-40k a year in this area) to fall back onto…

I agree regarding private school, but disagree regarding child care for younger kids. If you have two working parents with any overlap in their work schedules, you’re going to require some form of child care. If you’re really fortunate, you might have family and friends who are interested. In most cases, parents are going to be paying for it.

Well, the article is using childcare as something you should plan to cancel IF you experience a job loss. They’re not just saying, “yeah cancel your childcare now to save money and good luck with the whole two working parents thing.”

But child care is a gray area – even if you do lose your job. If you’re right back out there trying to get a new job, then you don’t want to pull Johnny out of daycare. You need time to go on interviews and write resumes and pound the pavement. Plus, daycare slots can be very hard to come by. You don’t want to give one up if you’re just going to need it again in a month, because you will need that if you get another job.

It’s a hard problem. My friend’s husband was laid off last year and I was kind of shocked at first when they continued their son’s daycare, but I now see the wisdom in it. The guy did get another job a few months later and didn’t have to worry about the childcare issue all over again.

But personally? If I lost my job tomorrow, I could maaaaaybe continue childcare for my two kids for a month before I’d need to pull them out. It wouldn’t be the end of the world, though, because we could survive on my husband’s salary just fine. I’d just consider myself an unexpected SAHM. But if my husband lost his job tomorrow, there is no question the kids would be yanked out of daycare immediately, because my salary alone can either (just barely) cover rent or daycare, but not both. And we unfortunately do not have enough savings to dick around in that situation.

I agree with everything you said, and pretty much argued the same in another comment. I was really just objecting to lumping child care in with private school as some privileged state. It’s essential for many working parents of young children. As you outlined, it’s not a simple decision to just walk away from quality care if you do lose your job.

I’m a single guy. My plan would be to toss the bank the keys to my house, load up my (paid for) car, grab the dog, and head for the hills of Maine where my family owns a vacation house. My living costs would be so low that I wouldn’t have to worry about a job for a while and would realistically only need to work part time to support just myself and the dog. The only thing is it might take a little while to get used to Maine after living in Florida all of my life.

I have a side job that I work a few hours a week at. It’s a work at home gig and it allows you to set your own hours, so while the pay isn’t as high as my real job, I always know that should push come to shove I’ll be able to make ends meet.

About the meth, turns out the restrictions on pseudoephedrine have had a negative consequence. The article referenced a new method of making meth, that’s gotten away from the standard cooking operation to something called shake and bake. It takes less pseudoephedrine. They put chemicals in a 2 liter soda bottle and shake. If the mix isn’t right, or they take the lid off too quickly or soon, it explodes and burns the baker.

The gist of the article was about the 7 burn centers that had to close partly because of all the meth burn victims with no insurance and no way to pay for the weeks of care and rehab. Other burn centers are suffering financially as well. Here’s the article:

My guess is if you’re not a tweaker, and you actually have some common sense & can measure and mix things properly, exploding meth containers might not be a concern. Personally, I don’t know why they don’t put the stuff in the bottle, and hang it from a tree & run a rope far enough away to mix the crap so if it does blow up, they won’t be burned.

I guess if your brain is on meth, you wouldn’t think of this.

In the article in our paper, they actually said something to the effect of at least with the old method, if something caught on fire, people had a chance to escape without getting seriously burned.

One of the first things that you should do is to know the state labor laws and company policies regarding separation of service. In California, accumulated vacation time must be paid on separation, and I have been hoarding it ‚Äújust in case‚Äù. Also, know what you can do with the 401k and any accumulated stock options.

It happened to us in 2009, we are still recovering. A company decided to close unexpectedly.

We had zero credit card debt, 25k in emergency savings, and a moderate budget. Then my husband got sick. Jobs were scarce.

Now in 2012 we are living across the country. No savings left. Only one of us has a job, and I just spent $1689 for a one month supply of the medicine he needs (that is WITH insurance). You can only plan so much, then you just try to survive day to day, sometimes hour to hour.